Authored by Steve Shardonofsky

In the beginning, the U.S. Supreme Court decided in Genesis Healthcare that an FLSA case is moot when the plaintiff accepts an offer of full relief. As we noted in our previous blog, the decision left open, however, the question of what happens when the plaintiff affirmatively declines the offer or when the offer expires, which is what happens in most cases (under Rule 68, an offer not accepted within 14 days is considered withdrawn). In addition, because Genesis Healthcare involved a collective action under the FLSA as opposed to a class action under Rule 23, the Supreme Court did not answer whether a Rule 68 offer of full relief to a class representative moots a wage-hour action that includes a Rule 23 claim under state law (or a case that involves only state law wage-hour claims). The Court may soon answer these questions and write the second, much-anticipated chapter in this legal saga.

On May 18, the U.S. Supreme Court agreed to review in Gomez v. Campbell-Ewald Company whether a potential Rule 23 class under the Telephone Consumer Protection Act may be mooted by an offer of complete relief. According to the class-action complaint filed by Jose Gomez in March 2010, Campbell-Ewald Company allegedly sent thousands of unsolicited text messages through a subcontractor in violation of the TCPA as part of the U.S. Navy’s recruitment efforts. While Gomez was still the only named plaintiff in the case and before the case was certified as a class action, the company offered to pay him (under Rule 68) for each unsolicited text message substantially more than the damages he could have recovered under the statute. In September 2014, the U.S. Ninth Circuit Court of Appeals reversed the lower court’s order granting summary judgment in favor of the company on grounds of derivative sovereign immunity and holding that the putative Rule 23 class action could continue even though the defendant offered full relief to the sole plaintiff before he moved for class certification. As the U.S. Chamber of Commerce noted in its amicus brief in support of the writ for certiorari, the 9th Circuit’s ruling harms employers and the judicial system because it encourages lawsuits and discourages settlements. More fundamentally, however, the ruling harms plaintiffs because it “allows putative class counsel to maintain federal lawsuits for their own benefit, even when their only client stands to gain nothing,” and there is no longer a live case or controversy.

In a reply petition for a writ of certiorari filed by Campbell-Ewald, the company emphasized that the case “presents a clean opportunity to decide the issue left open in Genesis Healthcare, as well as the related–and equally important–question of when an offer of complete relief moots a class claim.” The Court’s guidance on these issues is necessary for employers and wage-hour practitioners alike, because a Circuit split exists on whether a Rule 68 offer of full relief to a class representative moots a Rule 23 class action. Most recently, the 11th Circuit in Stein v. Buccaneers Limited Partnership joined the 3rd, 5th, 9th, and 10th Circuits in holding that it does not. By granting the writ, the Supreme Court may well be ready to answer this important question once and for all, and provide additional guidance on whether a court loses jurisdiction of an FLSA case and must dismiss it before it blossoms into a collective action after an unaccepted offer of judgment.

Like Genesis Healthcare, this the case is certain to prove to be a key precedent in wage-hour cases–under the FLSA and Rule 23. So stay tuned … we will keep our readers updated on any future developments.